House Subcommittee Addresses Design-Build Contracts

The House Committee on Oversight and Government Reform Subcommittee on Federal Workforce, U.S. Postal Service and the Census convened December 3, 2013, for a hearing to assess the federal government’s use of two-stage design-build contracts. The hearing was aimed at addressing concerns from the design community related to the current trend of the federal design-build process, how it can decreases competition in the bidding process and the obstacles it sets for participating design firms.

Generally, in the two-stage design-build process a federal agency post their project on the Federal Business Opportunity website (FBO) where any interested design team can submit its qualifications to the pre-selection board. In this first stage, the board analyzes all of the teams’ qualifications, which include prior experience, resumes and references to past relevant projects, to create a short-list of finalists to move on to the final and second stage. If selected to compete in the second stage, the design teams will create a more developed proposal, based on the requirements of the project, to be submitted for final judging.

Recently, when choosing finalist for the second stage of the two-step selection process, federal government agencies have begun creating short-lists of up to 10 firms siting that it increases competition. Under current law, agencies are required to short-list 3 to 5 design teams, but the law enables agencies to create longer short-lists if it is “in the Federal Government’s interests and is consistent with the purpose and objectives of the two-phase selection process.” Hearing witnesses suggested that by selecting more than the required 3-5 finalists, government agencies may be potentially decreasing the quality of projects by not selecting the “best of the best,” which can result in lost opportunities for innovation and new technology. Additionally, it puts an increased burden on the contract officers who must, in some cases, review double the amount of proposals than normal and further exhausts budgetary resources.

Many design firms are concerned about the costs associated with competing in these crowded short-lists. In order to craft accurate construction costs, design teams typically must have up to approximately 80 percent of the design work completed prior to the submission of the final design-build proposal. A recent American Institute of Architects (AIA) survey found that the average competition costs are approximately $260,000, usually with no stipends provided to the firm. To make up the costs associated with competition, a firm must simply hope they win the bid. This provides a considerable dilemma for smaller firms who are faced with the choice of “going all in” and absorbing the high costs, with reduced chances of winning, or self-selecting out of competition for a federal contract because, in some cases, firms cannot afford to compete.

Representative Sam Graves (MO) has introduced bi-partisan sponsored legislation, H.R. 2750, which aims to partially alleviate the problem by requiring contracting officers to provide a written justification to the head of an agency for requiring more than 5 finalists in the second stage of a design-build bidding process and receive agency approval. It also requires the use of the two-stage selection process for contracts having a value of $750,000 or greater. Subcommittee Chairman Blake Farenthold (TX), who is also a cosponsor, and Ranking Member Stephen Lynch (MA) both noted the possibility of increasing, the $750,000 contract value as the bill moves through the legislative process

The U.S. General Services Administration (GSA) did not testify during this hearing but has taken some steps to address the issue. In October 2013, GSA invited ASLA, AIA, the Association of General Contractors, the American Society of Civil Engineers, the American Council of Engineering Companies, and the Design Build Institute of America to participate in an Industry-Agency Summit on the subject of Design Competitions and Federal procurements. However, the federal government shutdown forced the agency to re-schedule the Summit for early 2014.